Goldman: Buy commodities now, worry about recession later

Goldman Sachs Group has urged financial market players to pile into commodities as most recession risks coursing through global markets are exaggerated. The group’s argument is that raw materials stand to rebound amid a profound energy crisis and tight physical fundamentals.

With oil the commodity of last resort in an era of severe energy shortages, the group believes the pullback in the entire oil complex provides an attractive entry point for long-only investments, so, economists view the risk of a recession outside Europe in the next 12 months as relatively low.

Commodities hit a record in June as Russia’s invasion of Ukraine disrupted output and snarled supply chains, then eased as recession concerns flared and central banks including the Fed tightened policy to contain inflation.

Last week, Fed Chair Jerome Powell signaled more interest rate rises will follow this half, and global stocks hit a one-month low on Monday.

Equities could suffer as inflation stays elevated and the Fed is more likely to surprise on the hawkish side” Goldman said in a note entitled ‘Buy commodities now, worry about the recession later.’

The note added: “Commodities, on the other hand, are the best asset class to own during a late-cycle phase where demand remains above supply”.